Deal Reached in Patent Infringement Case

By MARK JEWELL

BOSTON – A company that provides cellular phone billing services on Friday reached an $87 million settlement of a patent infringement case that had threatened to send it into bankruptcy.

The settlement is far less than the $128 million a jury had ordered Boston Communications Group Inc. and its co-defendants to pay Freedom Wireless Inc., a small, privately held firm that had sued over patents.

BCGI’s shares more than doubled in value on the late-afternoon announcement, closing up $2.09, or 109 percent, at $4.09 on the Nasdaq Stock Market.

The Bedford-based company said in a joint announcement with Freedom Wireless that they had reached a definitive settlement and a related agreement under which BCGI will pay $12.6 million in royalties to license technology used for prepaid cellular phone billing plans.

The $12.6 million is part of BCGI’s total $55.3 million obligation to settle all outstanding claims from Phoenix-based Freedom, a tiny, privately held company that sought patent protection for its technologies in 1994.

The remaining $32 million from the overall $87 million settlement is due from BCGI’s co-defendants – cellular carriers that have received billing services from BCGI, including Cingular Wireless, AT&T Wireless, CMT Partners and Western Wireless. BCGI’s previous obligation to indemnify its co-defendants from paying legal costs was dropped as part of the settlement.

E.Y. Snowden, BCGI’s president and chief executive, said in a news release that the company was “thankful to be able to end this chapter in BCGI’s history,” calling the settlement a way to avoid prolonging a legal battle that began when Freedom Wireless sued in 2000. The case has recently been slowed by appeals.

Larry Day, Freedom Wireless’ president, said in a phone interview that his company was “very happy for BCGI, and for the resolution between these parties.” He declined to further comment.

Freedom Wireless’ technology, developed by inventors Douglas Fougnies and Dan Harned, allows customers making prepaid calls to avoid dialing identification codes or calling toll-free numbers.

Last September, a Boston-based federal judge upheld a $128 million verdict that a jury reached on May 20, 2005, following a nearly two-month trial.

Boston Communications later warned it might not be able to continue operating or might seek bankruptcy protection if it failed to reverse the decision or couldn’t reach a deal to license technology from Freedom Wireless.

The $128 million award exceeded the 400-employee company’s total revenue last year by more than $20 million, and the company warned in a recent regulatory filing that damages combined with interest and court costs could total $165 million.

BCGI’s stock traded around $10 a share in late 2004 but sank after the jury verdict. Over the past year, the stock has traded as low as 87 cents to as high as $2.99.

About 90 percent of BCGI’s total revenue comes from its U.S. prepaid wireless services to customers including Verizon Wireless, Cingular and Nextel Communications.

Prepaid cellular customers pay for blocks of minutes and typically get standard features like voice mail and text messaging. But there are no credit checks and often no activation fees. Customers who use up their minutes can simply buy more or choose not to do so.